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Final Decision Released On California’s NEM 2.0 Program

On January 28, 2016, the California Public Utilities Commission (CPUC) narrowly voted 3-to-2 to enact its net energy metering (NEM) successor tariff, commonly known as NEM 2.0. The CPUC issued a 123-page final decision with details of the NEM 2.0 program on February 5, 2016.

For the past decade, the original California NEM program provided investor owned utility (IOU) customers that went solar with a full retail-rate credit for the surplus solar power they send back to the grid. The original net metering program has been extremely popular among California IOU customers seeking to lower their utility charges with a customer-sited solar generation system. As of September 30, 2015, over 410,000 of these customers had connected over 3,200 Megawatts of net-metered generation systems, making California the leading state for U.S. solar adoption.

Under the NEM 2.0 program, the CPUC’s main objective was to ensure that customer-sited renewable distributed generation continues to grow “sustainably,” and this meant balancing the interests of IOU solar customers, IOU non-solar customers, and the IOUs themselves. Fortunately for residential and commercial businesses considering a future solar project that may be governed by NEM 2.0, the CPUC’s final decision on NEM 2.0 generally maintains the retail-rate benefits under the original NEM program. This paper summarizes the most important details of the CPUC’s final decision on NEM 2.0.

What are the most significant provisions/ revisions under Net Metering 2.0?

1 – NEM Retail Rate Credit continues until at least 2019.The CPUC currently views NEM 2.0 as a transition program since “work on the successor tariff would greatly benefit from more information and improved analysis that the Commission has set in motion.” As such, the CPUC decision chose to “continue the basic [full retail rate] NEM structure, while aligning the responsibilities of NEM customers more closely with those of other customers in their customer class.” The CPUC stated that it will review the NEM 2.0 program in 2019, after a better understanding of the impact of customer-sited distributed energy on the grid from several significant ongoing proceedings– its distribution resources plan (Rulemaking (R.) 14-08-031), its integrated distributed energy resources proceedings (R.14-10-003), and its recently opened rulemaking to consider technical issues for future Time-Of-Use (TOU) rates (R.15-12-012). Despite the requirements of any successor tariff to NEM 2.0, customers may continue to take service under the NEM 2.0 program for 20 years from the year of interconnection of the customer’s system.

2 – Non-Bypassable Charges apply to NEM Customers.Non-bypassable charges (NBCs) are charges that all IOU customers have to pay, and they are used to fund public purpose programs, competition transition charges, nuclear decommissioning and Department of Water Resource bond charges. Historically, NEM customers have only paid for NBCs over the course of a year to the extent they consumed more electricity from the grid than their solar systems produced. The final decision requires that NEM successor customers pay for NBCs on all energy they consume from the grid, regardless of the amount of energy they have exported to the grid. The converse would also be true in that new NEM customers would not pay NBCs on the amount of power they consume directly from their self-generated solar system. California Solar Energy Industries Association (CalSEIA), a nonprofit solar advocacy group, believes that NBCs would have the following cents-per-kilowatt-hour-cost for NEM customers on power they consumed from the grid:

3 – No 1MW AC Cap. NEM 2.0 removes the arbitrary cap of 1 Megawatt AC on NEM projects. Eligibility has been extended to projects bigger than 1 Megawatt AC, which was the project size cap under the original NEM program, as long as the solar customer can pay the applicable interconnection and upgrade fees to connect their solar systems to the grid.

4 – One-time Interconnection Fee. The CPUC decision requires that NEM customers pay a reasonable interconnection fee to their IOU for connecting their customer-sited solar system. In the calculation of the interconnection fee, each IOU may include processing and administrative costs, engineering costs and metering installation/ inspection and commissioning costs. The CPUC estimates that this cost will be between $75-$150.

5 – Residential NEM Projects go on TOU Rate. TOU rates charge different prices during different times of the day in an effort to better match real-time costs of generating and transmitting energy across the grid. Starting as soon as NEM 2.0 is implemented, the CPUC requires residential net-metered solar customers to move to TOU rates available to them. For SDG&E customers, the current tiered rate will apply for a period of 5 years as SDG&E awaits the implementation of its TOU rate.

When does Net Metering 2.0 begin?

The new program will begin on the earlier of July 1, 2017 or as soon as the 5% net metering cap is reached in the applicable IOU service area. Pursuant to the chart below, CalSEIA estimates that the net metering cap will be reached in the SDG&E service area by April 2016, in the PG&E service area by October 2016 and in the SCE service area by April 2017.

For more details on California’s Net Metering 2.0 program, please reach out to Cenergy Power at our website—www.cenergypower.com. Please make sure you continue to get updated on our solar news and insights by following Cenergy on Twitter @Cenergy_Power and revisiting our blog The Solar Report!

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Cenergy Power is a clean power solutions company comprised of seasoned power system professionals and financial experts focused on one thing: delivering unmatched value to commercial, agricultural and utility customers interested in solar photovoltaic ("PV") solutions.